Their View: New Mexico Finance Authority good for state

SANTA FE — The New Mexico Finance Authority Oversight Committee affirms its support of the New Mexico Finance Authority.

The New Mexico Finance Authority has received widespread attention for its false 2011 audit and past management decisions, so it's time to take a clear-eyed look at what the authority does and how it benefits the state economy.

The authority helps counties, cities and towns, school districts, state universities and other state-related entities borrow money to build roads, water systems, firehouses and other public buildings and to purchase fire engines and other essential equipment. These loans generally have lower interest rates than those otherwise available from private lenders, thus reducing costs and saving taxpayer dollars. The loans also allow governmental borrowers to complete infrastructure and job-creating projects that would not otherwise get funded in a timely manner.

Anyone who has tried to buy a house knows how debt financing works — the greater your assets, collateral, and credit rating, the lower your interest rate. The authority is able to offer superior government-leveraged assets, collateral and credit ratings (aka "bond ratings") in the borrower's stead, then provide the lower interest rates to governmental entities such as small towns, rural counties and school districts that lack the assets, collateral and credit ratings to obtain lower interest rates on their own. Often, larger governmental entities, such as cities and state universities, can also obtain lower interest rates through the authority.

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Not every governmental borrower in every instance will obtain the best loan through the authority, depending on the timing, the need for flexible terms and other variable conditions. Private lenders earn plenty of governmental business for those reasons. However, the mere presence of the authority in the marketplace serves the state. Even when obtaining financing through the authority is not the best option, other lenders may be compelled to provide more competitive rates because they know the rates that are available through the authority. It is worth the time for governmental borrowers to shop the market and compare the authority's rates with those of other lenders. In the end, taxpayers benefit.

In the wake of the 2011 fake audit situation that came to light in June, the public was exposed to murmurs and rumbles that questioned the management of the authority and the role of the authority in funding state projects. Could internal management procedures concerning the audit process have been more stringent? According to testimony at New Mexico Finance Authority Oversight Committee meetings and an exhaustive report from Hewitt EnnisKnupp on best governance practices as applied to the authority, the answer is yes. Were internal management procedures relating to management of money and accounts rigorous enough to merit the continued high bond ratings, with no downgrade, from Moody's and Standard & Poor's? Again, the answer is yes.

Anyone who lives in, or knows anyone who lives in, a community where infrastructure such as roads, water systems, public buildings, firehouses, fire engines and other necessities is sorely needed, knows what a difference funding those projects can make. The lower the interest rates, the greater the likelihood that critical projects will be completed, and the lower the cost of those projects to taxpayers. Having the New Mexico Finance Authority around to make that happen, directly or indirectly, helps everyone in the state.

With strong financials and continued investor confidence in its bonds, the authority has been a good entity for New Mexico. Its very publicly aired faults have resulted in appropriately increased scrutiny and helpful governance and audit practice recommendations. Already, the authority has begun aligning its management structure and practices with governance best practices. The bipartisan New Mexico Finance Authority Oversight Committee has confidence in the authority's ability to emerge from this tumultuous phase a better entity. Instead of listening to the drumbeat to dismantle or disable the authority, now is the time for the state to stand behind the New Mexico Finance Authority. That will benefit us all.

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